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Keren Hishtalmut Withdrawal: When Can You Take the Money Tax-Free?
The seniority date (תאריך ותק) sets every deadline that follows.
A Keren Hishtalmut withdrawal is tax-free for any purpose once six years have passed from the fund’s seniority date known in Hebrew as the “Ta’arich veteq – תאריך ותק”. This is usually from the first deposit into the account. The wait drops to three years if you have reached retirement age, or if the money pays for your professional training. Taking it out before the liquidity date will lead to the deposits and all the gains being taxed at a very high rate as high as 47%.
The tax exemption applies only to deposits within the legal ceiling, and gains on money above it are subject to 25% tax even after six years. The self-employed also have an annual limit in place of a salary ceiling, on which they receive tax exemptions too.
Any withdrawal also changes the account itself. Taking out even part of the balance ends the ability to deposit more into that account, unless it is up to a third of the balance for training in Israel. Moving the funds to another Keren Hishtalmut fund or company does not impact the original liquidity date.
Points to note:
- When is a Withdrawal From the Fund Tax-Free
- Where the Exemption Ends: Deposit Ceilings
- What Early Withdrawal Costs You in Tax
- Partial Withdrawals and Leaving the Money In
- How to File the Withdrawal Request
- The Takeaway
- Frequently Asked Questions
When is a Withdrawal From the Fund Tax-Free
Section 9(16a) of the Income Tax Ordinance covers employees and section 9(16b) covers the self-employed. Together they exempt a withdrawal in the four situations below, and only the start of the count differs between the two groups.
| Situation | Earliest tax-free date | Use of the money |
|---|---|---|
| Standard route | 6 years after the first deposit | Any purpose |
| Retirement age reached | 3 years after the first deposit | Any purpose |
| Professional training | 3 years after the first deposit | Training only |
| Death of the saver | Immediately, for money that was exempt | Paid to the beneficiaries |
Retirement age is 67 for men and rises gradually from 62 to 65 for women, depending on the year of birth. The Income Tax rules on training withdrawals allow them up to an eligible amount, for training that maintains your professional level in your field. In some instances, age 60 may be a qualifying factor.
How the Six Years Are Counted
The count usually runs from the first payment into that account, and its start differs for employees and the self-employed. When it ends, you can withdraw everything in the account, including recent deposits.
For an employee, section 9(16a) starts the clock at the end of the month in which the first payment was made, or the month it was paid for if that is earlier in the same tax year. Kol Zchut, the public rights guide, gives this example: deposits paid in March 2026 for salaries back to December 2025 start the count at the end of January 2026, and the money becomes available in early February 2032.
For a self-employed saver, Kol Zchut starts the count at the end of January of the tax year of the first deposit. A first deposit in May 2025 therefore becomes available in early February 2031, less than six years later. Ask the fund to confirm your date in writing.
Moving Funds or Changing Jobs
Moving your balance to another fund keeps your original seniority, even when a different company manages the new fund. A new fund opened at a new job can also inherit the old date in certain scenarios. The Income Tax regulations on linked fund accounts set two conditions: you and your employer gave both funds notice of the change, and no tax-free money left the old account before it closed. The second condition also covers a move between an employee account and a self-employed one. In most situations, a new fund is opened, and a new start date for the fund at the new place of employment starts from scratch.
Where the Exemption Ends: Deposit Ceilings
The exemption covers deposits within a legal ceiling. An employee’s contributions are usually 7.5% from the employer on top of gross salary and 2.5% from the employee within it, on a monthly salary of up to 15,712 NIS. You can read how contributions work for each employment status on our product page.
Self-employed savers deposit on their own and benefit from a double tax exemption. For 2026, up to 4.5% of taxable income, capped at 13,203 NIS, counts as a deductible expense, and gains are exempt from capital gains tax on deposits of up to 20,566 NIS a year. These limits can change from one tax year to the next.
You can deposit above those limits, but that money falls outside the exemption. Employees receiving a Keren Hishtalmut above the 15,712 NIS salary ceiling will be taxed on the employer’s deposits above this tax free ceiling. This will appear in the monthly salary pay slip. Gains on any deposit above the ceiling, will be subject to taxation upon withdrawal of the funds.
What Early Withdrawal Costs You in Tax
An early withdrawal is taxed, but not all of it. For an employee, the employer’s deposits and the gains on your deposits and the employer’s count as income at your marginal rate in the year you withdraw. Your own 2.5% is not taxed again, because it came out of taxed salary. Employer money above the ceiling is not taxed again either, because it was likewise taxed when it was deposited.
The withholding regulations have the fund deduct tax at the top rate, which Kol Zchut puts at 47%, unless your assessing officer (pakid shuma) approves a lower rate in writing. Get that approval before you withdraw, or file for a refund after the tax year ends.
As an illustration, an employee at the salary ceiling withdraws after one year, with 14,140 NIS of employer deposits and, for simplicity, no gains. At an assumed 31% marginal rate, the tax is about 4,384 NIS. If the fund withholds 47%, it keeps about 6,646 NIS, and about 2,262 NIS comes back as a refund.
For the self-employed, the Ordinance treats the deposits you deducted as an expense and all the gains as business income in the year you receive them. Deposits you never deducted come back without that tax.
Before an early withdrawal, consider asking your fund about a loan. This may be a better option if one can afford the monthly repayments, allowing the fund to continue to compound in a tax efficient manner.
Partial Withdrawals and Leaving the Money In
What a Partial Withdrawal Closes
You do not have to empty the fund, but a partial withdrawal ends further deposits into it. Section 9(16a) makes the exemption conditional on that account taking no further payments. Phoenix’s withdrawal page describes what happens next: the balance left behind keeps earning and stays available as before, and subsequent new deposits go into a new fund account with a new seniority date. The fresh six-year wait therefore applies to the new money only.
The exception is a withdrawal for training in Israel of up to a third of the balance, with no similar withdrawal in the previous 12 months. Section 9(16a) does not count that as a withdrawal for this rule, and the account stays open. It is still a training withdrawal, which on our reading of the section means the three-year wait applies before it is tax-free.
If You Do Not Need the Money Yet
No date forces you to act. You can withdraw when the six years are up or at any time after. Bizportal notes that the exemption on gains continues while the money stays in the fund, and that changing the investment track does not count as a withdrawal. That is the edge over a Kupat Gemel Lehashka’a, where profits are subject to capital gains tax on withdrawal, currently 25%.
In October 2025 the Finance Ministry’s Chief Economist recommended cutting this tax benefit significantly, with priority to lowering the income ceiling for deposits. That is a recommendation only, and as of the writing of this article, no such changes have been implemented or approved.
How to File the Withdrawal Request
You file a Keren Hishtalmut withdrawal with the company that manages the fund.
- Ask the managing company for the date of the first deposit and how much of the balance is above the ceiling.
- Fill in the withdrawal form, which you can usually download from the company’s website.
- Attach a copy of your ID and a bank document showing the account is in your name.
- If you are an employee, check whether the company also wants a release letter from your employer.
- If you are withdrawing early, get the assessing officer’s approval for a lower tax rate. If the money is for training, find out what proof the fund wants.
- Send the request. Most companies state that handling takes 4 business days from the date it has all the completed paperwork, though this may differ slightly for each company.
The Takeaway
Before any Keren Hishtalmut withdrawal, get two facts from your fund: the date of the first deposit, and how much of the balance is inside the ceiling to ensure there are no tax surprises.
Goldfus Insurance is part of the Oren Mizrach Group and is a licensed agency that provides information on and sells insurance and pension products. It is not a pension or financial adviser. Tax implications should be discussed with a licensed CPA or tax professional. For the contribution rules, see our Keren Hishtalmut page, and if a fund is held through us, you can contact our office with your questions.
Frequently Asked Questions
How do you say Keren Hishtalmut in English?
There is no single official term. You will often see the terms “study fund” or “training fund” used, though most people simply use the Hebrew term, Keren Hishtalmut. Hishtalmut means professional development, which is what the fund was initially meant to pay for.
What is a Keren Hishtalmut used for today?
A Keren Hishtalmut is a savings fund for employees and the self-employed alike, with most savers now using it as medium-term savings. According to the Finance Ministry’s Chief Economist, the first funds were set up for teachers, to pay for a study or sabbatical year after six years of saving. The limits on use were later lifted, and the funds can be used for anything the funds holder wants to use it for.
Where can I see the start date of my fund?
The start date can be seen on the annual statement or the personal zone on the personal portal on the website of the company where the keren Hishtalmut is invested.
Do I need to take the money after 6 years?
No. The 6 year period is usually the minimum period before which tax benefits apply to the withdrawal of funds. For those who do not need the funds, it is recommended to leave the funds past the liquidity date enabling the money to continue to grow in a tax free savings vehicle.
If I don’t take the money after 6 years, does the 6 years liquidity period start again?
No. The 6 year liquidity period is a one off. Once the fund reaches its original liquidity date, the money remains liquid. It is not locked in for another 6 years. Once the initial tax exempt period is reached, the tax exemption and liquidity of the fund remains in place until the future time the fund is withdrawn. Until that time, it will continue to grow and compound in a tax free and liquid fashion.
Does leaving my job release the money early?
No. Leaving a job is not one of the tax-free routes. The fund stays in your name and keeps the original seniority date, continuing to compound and grow in line with the funds’ growth. If you become self-employed, you will also need to open a new fund.
Who gets the money if a saver dies?
The beneficiaries named within the fund get the funds. The government’s end-of-life guide says the money is not part of the estate, so that instruction overrides a will unless the will has a later, explicit instruction for that fund. If nobody was named, payment follows a probate or inheritance order. Beneficiaries can withdraw tax-free, apart from any part that was taxable to begin with. Beneficiaries can be changed by the policy holder at any time.
How do I find an old fund I forgot about?
Use Har HaKesef, the Finance Ministry’s site, which shows whether and where you hold savings in a fund. An old fund keeps gaining seniority, and it may already be available to withdraw.
Do these rules cover tax in another country?
No. They cover Israeli tax only. If you also file in another country, such as the US, ask an accountant who works with both systems how that country treats the fund.
Should a US citizen open a Keren Hishtalmut?
For a salaried employee, usually there are no issues in opening a Keren Hishtalmut. However, for US citizens who are self employed, the majority of US tax professionals tend to advise against opening a Keren Hishtalmut, due to these funds being considered a PFIC.
For anyone with US citizenship opening a Keren Hishtalmut, be they self employed or employed, they will have to complete a W9 form and FATCA form as part of the form process in starting the fund.
Our advice is for anyone with US citizenship to first consult with a licensed US tax professional in order to get specific advice as to what is in their best interest.
